"from henceforth none be so hardy to tell or publish any false News or Tales, whereby discord, or occasion of discord or slander may grow between the King and his People, or the Great Men of the Realm."

Another thesis section. Note that I’m breaking sections more frequently than I do in the thesis itself – I’m splitting them up smaller to facilitate blog reading. That’s why they will sometimes end abruptly, as here.

This is a draft of an unfinished document, please don’t quote without getting in touch first. Quoting in blogs is fine.

The reproduction of capitalist society occurs (among other things) through the continual reproduction of both the economic and state systems. Both systems are complex ensembles of institutions and practices. They are not separate from one another, but interpenetrate, with each dependent on the other. Nevertheless, we can distinguish them from one another as relatively autonomous structures of quite different types. The capitalist economic system is one of production and distribution organised primarily through a combination of property (and therefore the capital-labour relation) and value (competition and exchange) relations. Capitalist states are organised around a legal system, bureaucracy and sovereign deliberative system, the latter a site where the other two branches are constituted and reconstituted. [1]

The economic system is not self-reproducing and depends on the state in a number of ways, most obviously for the legal foundation and enforcement of property rights, contracts, and so on. Beyond these ‘night-watchman’ duties acknowledged by classical liberalism, it also depends on the state for the reproduction of certain moments in the circuit of capital, namely, labour-power and money. Though historically capitalism emerged partly through the convergence of the spontaneous production of these elements (i.e., it developed originally on the basis of commodity money and the surplus rural population emerging in late-feudal society), their reproduction proved to be ridden with contradictions and tending towards periodic crisis. In both cases state institutions and activities emerged to stabilise their reproduction. As de Brunhoff [1978] describes, work discipline and a wage compatible with the generation of surplus value depends upon the reproduction of a pool of unemployed labour (the ‘reserve army’) which competes with the employed for work but receives no subsistence from capital and therefore requires state management, in some form from workhouses to the dole. Capitalist forms of credit money develop on a basis of commodity money but are unstable, resulting in periodic devaluations and/or deflations – so central banks emerged to manage banking systems, counteract the cycles of over-extension and crash, and facilitate integration with world money. In neither case does the state control what it intervenes in, but it becomes “necessarily involved in the reproduction” process. [de Brunhoff, 1978: 40]

Suzanne de Brunhoff

The state has a certain institutional unity, based, in the case of the typical democracy, on the unity of the top executive branch, answerable to the law-making body. But at the same time, its structure contains a very diverse range of elements, elements which develop in an uneven way in response to a wide range of ‘problems’ in wider society, and are not necessarily perfectly co-ordinated; in fact potentially different branches work at cross-purposes, as the ‘problems’ they deal with represent social contradictions in the sense that ‘solutions’ counteract one another. Different ideologies develop within different branches from different perspectives their particular ‘problems’ throw on the social whole; for example, a ‘Treasury line’, a police worldview, and so on. State power, in Poulantzas’s terms, is at best a “fissiparous unity”. [Poulantzas, 1978: 136]

To follow de Brunhoff’s examples, the problems involved in reproducing labour-power and those of managing money historically led to the evolution of quite different state apparatuses, with little apparent overlap: on one side institutions from workhouses to pensions, and on the other central banks and banking legislation. She does note the historical proximity of the Poor Law (1834) and the transformation of the Bank of England into a central bank proper a decade later: “The law seems to have defined its gold reserves and its reserves of labour-power almost simultaneously.” [de Brunhoff, 1978: 61] But it is debatable whether this is much more than coincidence, and the more important point is that the central bank and the operation of the Poor Law were completely unco-ordinated, despite the fact that the unemployment and monetary phenomena they each dealt with were closely connected in the economic sphere. There was, in the nineteenth century, nothing like a unitary state subject intervening in the economy.

By the mid-twentieth century this had changed. For de Brunhoff the Depression, New Deal and Keynesian revolution are an historic break in this regard, before which ‘economic policy’ – as opposed to ad hoc management of labour-power and money – cannot be said to have existed. In my view, at least in the case of Australia, the mobilisation of World War II was the watershed. The ideological/scientific shift within economics – not only Keynes but a wider range of developments including especially the development of econometrics and great expansion in government statistical collection – of that period was indeed crucial. But it did not, I think, come entirely out of the blue. We can trace the roots of this emergence further back, in the developing awareness and playing out of the contradictions between the emergent power of organised labour and the demands of world money – a story I will develop with regard to Australia below.

A crucial symptom of the turning point, for de Brunhoff, is the emergence of the state within theoretical economic models as a coherent actor, even a ‘subject’, with the power to set key systemic variables in the pursuit of certain objectives.

What is significant here is the notion of involvement by the state in some global task of an economic character… The reproduction of labour-power and the general equivalent [i.e. money] remain the key points of state intervention, but the forms of their management have been modified because of their incorporation of a global framework, whose emergence reflects real changes in bourgeois strategy which require examination. [de Brunhoff, 1978: 62-63]

A material precondition for this ideological shift was that branches of the state had already evolved into key points within the economic system. Central banks occupied the apex of the domestic banking pyramid, and by centralising foreign exchange formed a nexus between domestic credit-money and world money. Income flows of a substantial size passed through treasuries in taxation and public expenditure. Arbitration systems of various types (in Australia, judicial) had emerged out of industrial conflict. The theoretical reconceptualisation of the economic system in macroeconomic terms identified these points as potentially strategic points from which money flows could be strengthened, weakened, and rechanneled.

[1] Note that the systems have quite different geographical extents. The economic system is a global system, a world market, though forces of competition and therefore value relations are disrupted by national boundaries and other geographical factors. States, on the other hand, are territorial. Of course at a global level we can talk of an international state system, individual state systems are interrelated with those of other states, and so on, but in quite a different way to the relatively smooth geography of economic interaction. This will be elaborated with respect to economic policy below.

Mike,
I like this a lot, a real lot, and it’s really helping me think about the work I’m hoping to do soon re: workmen’s compensation. Thanks for posting this. I’m particularly interested to see where you go with the stuff at the end about industrial conflict and arbitration systems.

One minor quibble:
“Though historically capitalism emerged partly through the convergence of the spontaneous production of these elements (i.e., it developed originally on the basis of commodity money and the surplus rural population emerging in late-feudal society), their reproduction proved to be ridden with contradictions and tending towards periodic crisis.” The “though” suggests that this isn’t a claim with much force for your argument. As such, it may not matter, but for what it’s worth I’m not sure about this formulation of the origins of capitalism. I’m not nearly as up on the debates on the transition to capitalism as I’d like to be but I have a hard time seeing where primitive accumulation fits here (and I know you qualify the claim, this is only _partly_ how capitalism emerged. Still…. Out of curiousity, have you read Michael Perelman’s book on primitive accumulation?)

Second quibble:
“potentially different branches work at cross-purposes, as the ‘problems’ they deal with represent social contradictions in the sense that ’solutions’ counteract one another.”

I think this is a really succinct statement as to why the capitalists and the capitalst state have interests which if followed will result in the capitalist state having elements which contradict each other. I’m not sure that this is the only explanation for the relative autonomy of different elements of the state from each other, or of their conflicts. Rather, I think this is one explanation for some of those conflicts, as well as an explanation for why under capitalism it might be counterproductive for capitalist purposes if the state were conflict free. Not really a disagreement here, I just think your claim could use a bit of qualification.

Third quibble “branches of the state had already evolved into key points within the economic system”

why _evolved_ and not “moved” or some other term without the baggage of evolved? Do you want those connotations? If so, why? That’s not a rhetorical question, if you’ve got an argument for that word choice I’d like to hear it as I imagine it’ll be really interesting.

Thanks heaps, like I said these comments are great and you already get a mention on the acknowledgements page!

Re: the arbitration system: yeah it’s a big part of the story I cover in Chapters 4 and 7. I think it’s a really interesting story how the whole basis of judicial decisions, and union and employer arguments, is transformed by incorporating macroeconomic ideology – previously it was about ‘a fair wage’ and ‘capacity to pay’ – so that it’s integrated into the macro-policy apparatus. But always very imperfectly; it’s the most fickle ‘instrument’ policy-makers have. The end-point of this process (in my thesis) is the Accord (see wikipedia) of the 1980s. You should really talk to my friend Sam, whose looking at the same period but much more from a labour history perspective. We might co-write a paper on this.

Re: origins of capitalism: That’s a really good point. I’m not that up on the debate either, though I’d like to be. I should read the Perelman book, he’s on an email list I’m on and I like his stuff. I’m a little more confident about the money side, how capitalism transformed the commodity money system it inherited. Pierre Vilar’s classic book on gold and money 1420-1920 is great on this.

Re: ‘evolving’ branches of the state: I like the word evolved here and it is deliberate, because it suggests a gradual and blind process rather than an intentional one. Some state expansions are definitely more deliberate movements, though they still get refined over time based on ‘what works’ and what changes elsewhere in the system. But in both the cases I’m focusing on here – the government budget and the central bank – they developed for centuries without any conception they would be used in a macro-policy way. The story of the Bank of England is especially interesting, emerging as a private company in the 17th century to centralise lending to the state and gradually accumulating regulatory functions in the 19th century. Goodhart’s [1985] book ‘The Evolution of Central Banks’ is a reference point here for what happened around the world in the 19th and 20th century. Both the US and Australia came really late to central banking.